What does Apple's AR-fueled future look like?

Apple is just one among many companies in the midst of an augmented reality (AR) push that could revolutionize the way people interact with the world — and with brands — through smartphones and eventually wearable devices.

Apple’s next phone, the iPhone 8, is expected to have AR built into the device, a move at least one analyst believes will result in a “paradigm shift” as the company creates new experiences by pairing the phone’s services and features with AR. At the same time, Apple and Facebook are reportedly racing to create AR-ready glasses to challenge upstarts in the space like Magic Leap, according to the Financial Times.

For Apple, AR and AR-ready hardware present a fresh opportunity to be a tech industry leader in innovation following a relatively stagnant period that’s drawn some heavy criticism. However, it faces some heavy competition from Google, Facebook and others also looking towards AR as an important shift in computing.

“Apple is obviously looking for the next big thing,” said Neil Mawston, executive director, wireless device strategies, for the research firm Strategy Analytics. “Apple has built a good business on iPhone, iPad, iTunes, iPod, etc. But most of those are starting to peak or slow down. Augmented reality is potentially the next big thing bringing together virtual and real worlds.”

Pushing past gaming

In February, the International Data Corporation (IDC) forecast that worldwide revenues for augmented and virtual reality would reach $13.9 billion this year compared to just $6.1 billion in 2016. IDC also predicted that augmented reality spending will surge past virtual reality spending after 2018, with separate reports noting the technology “may just be on track to create a shift in computing significant enough to rival the smartphone.”

Augmented reality, where digital assets and effects are overlaid on the real world through people’s mobile devices, exploded on the scene last summer with Pokemon Go.

Developed by Niantic and Nintendo, the mobile game hit $600 million in revenue in a little less than 90 days, according to marketing researcher App Annie. By comparison, it took Candy Crush Saga — another giant in the mobile games space — more than 200 days to reach that goal.

While Pokemon Go laid out some manner of blueprint for developers to follow when pursuing AR, most brands don’t have beloved game and cartoon characters from the ’90s to leverage.

“Trying to make a single-use AR [augmented reality] app that isn’t a game is a hard sell,” said Jeff Ward, principal software engineer at app-development firm WillowTree Apps.

Even AR experiences that copy Pokemon Go’s business model are likely to run into obstacles. App users are only just warming up to AR and might not readily engage with the technology without a strong brand component, experts said.

“Pokemon Go did really, really well,” said Ward. “What people don’t talk about is that the company that made Pokemon Go made the exact same game [Ingress] three years prior that did not do well. It’s the Pokemon name attached to that game that made it do as phenomenally as it did.”

Ultimately, attempting to replicate the success of other AR apps — whether they be Pokemon Go or, in Apple’s case, Snapchat with its new video messaging editor Clips — might be the wrong way to think about a technology that requires more forward-thinking innovation to evolve.

Fortunately for Apple, this is a space where it’s thrived in the past.

The Apple advantage

Much of augmented reality’s brand promise lies in the ability to layer ads and other information over the real world, said Strategy Analytics’ Mawston.

“If you could envision a pair of AR smart glasses from Apple, you could look at, for example, a McDonald’s restaurant, wondering how much the menu might be and bring up the menu on your glasses before you even go in,” he said. “Somebody like Burger King might pop up on the side of your glasses and say: ‘Look, we’ve got an offer on for a cheeseburger that’s half the price.'”

One of Apple’s advantages in the augmented reality race is its reputation for making technology approachable, said WillowTree’s Ward.

“What Apple can do and what Apple does better than a lot of companies, is they can take this technology, make it approachable for developers […] and show them how ordinary people can use it from day to day,” he said.

Making AR more approachable will be crucial for the technology reaching critical mass adoption, and Apple has shown in the past that it can make new devices — from MP3 players to tablets — palatable to broader audiences.

The nascent state of augmented reality leaves a wide-open opportunity for Apple, said Mike Bloxham, a senior vice president at research-and-consulting firm Frank N. Magid Associates.

“There is still a space for a major player to come in as a platform and take hold of this and be the one that drives it forward, if they do it in a way that resonates with owners of the phone,” he said.

Looking back to look ahead

Years ago, Apple played an analogous role in music to the one it could play with AR, Bloxham added.

“It’s easy to forget now that it was pretty much Apple that brought the notion of downloading music to the general public at a time when it was all about Napster and ripping stuff off,” he said. “It’s not too difficult to see how, if Apple were to really double down [on augmented reality], how AR could be fairly seamlessly integrated into some of the core functions of the phone.”

Apple could spur augmented reality adoption by focusing initially on core smartphone functions such as GPS, maps and the camera. Once consumers are accustomed and comfortable with these interfaces, it will be easier to serve ads on them.

“Rather than having to rely on an infrastructure of app creators that people then have to go find in the iTunes store or anywhere else and download them, they could integrate this fairly effectively into some of the functions of the phone and, thereby, find that there’s a user base already installed,” Bloxham said. “That, in turn, could create a situation in which the feasibility of scaling independently created apps becomes much more realistic.”

Revolutionizing retail

If augmented reality takes hold — as many, including Apple CEO Tim Cook, predict it will — retail is a sector with perhaps the most obvious opportunities.

Williams-Sonoma last week announced a smartphone app for Pottery Barn that lets customers see how a product will look in their homes before they buy. The “3-D Room View” app allows customers to add, move and remove furniture, rugs, lamps and pillows, and even change the color of the upholstery or pillows, and zoom in to see details or finish.

Pottery Barn is initially focused on living room furniture and decorations, but reportedly will add more rooms later this year. It’s not hard to see how this type of technology might pick up traction with more brands who rely on a heavy in-store component, and Apple’s potential facilitation of hardware and software development in these areas is enormous.

“If you think about all the data retailers have on you and the differentiated offers and information flow that could be made available to you as you walk around different parts of the store, that kind of stuff could have a very immediately gratifying deliverable to the consumer,” Bloxham said. “Because then it becomes a more sophisticated and timely, customized version of couponing.”